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Effective Yield Formula

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Effective Yield refers to the yield of a bond where the bondholder reinvests its interest payments, or coupons, at the same rate. Check FAQs

i = 1 + {(\frac{NR}{n PYr})}^{n PYr} - 1

i - Effective Yield?NR - Nominal Rate?n_PYr - Number of Payments Per Year?

Effective Yield Example

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Here is how the Effective Yield equation looks like with Values.

Here is how the Effective Yield equation looks like with Units.

Here is how the Effective Yield equation looks like.

298.9039 = 1 + {(\frac{19}{3.2})}^{3.2} - 1

298.9039 = 1 + {(\frac{19}{3.2})}^{3.2} - 1

298.9039 = 1 + {(\frac{19}{3.2})}^{3.2} - 1

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Effective Yield Solution

Follow our step by step solution on how to calculate Effective Yield?

FIRST Step Consider the formula

i = 1 + {(\frac{NR}{n PYr})}^{n PYr} - 1

Next Step Substitute values of Variables

∴

i = 1 + {(\frac{19}{3.2})}^{3.2} - 1

Next Step Prepare to Evaluate

∴

i = 1 + {(\frac{19}{3.2})}^{3.2} - 1

Next Step Evaluate

∴

i = 298.903907444971

LAST Step Rounding Answer

∴

i = 298.9039

Effective Yield Formula Elements

Variables

Effective Yield

Effective Yield refers to the yield of a bond where the bondholder reinvests its interest payments, or coupons, at the same rate.

Symbol: i

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Effective Yield

Nominal Rate

Nominal Rate refers to the interest rate before taking inflation into account.

Symbol: NR

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Nominal Rate

Number of Payments Per Year

Number of Payments Per Year is the count on the paymenst made for the interest on bond in a particular year.

Symbol: n_PYr

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Number of Payments Per Year

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How to Evaluate Effective Yield?

Effective Yield evaluator uses Effective Yield = 1+(Nominal Rate/Number of Payments Per Year)^(Number of Payments Per Year)-1 to evaluate the Effective Yield, The Effective Yield formula is defined as the return on a bond that has its interest payments (or coupons) reinvested at the same rate by the bondholder. Effective Yield is denoted by i symbol.

How to evaluate Effective Yield using this online evaluator? To use this online evaluator for Effective Yield, enter Nominal Rate (NR) & Number of Payments Per Year (n_PYr) and hit the calculate button.

FAQs on Effective Yield

What is the formula to find Effective Yield?

The formula of Effective Yield is expressed as Effective Yield = 1+(Nominal Rate/Number of Payments Per Year)^(Number of Payments Per Year)-1. Here is an example- 298.9039 = 1+(19/3.2)^(3.2)-1.

How to calculate Effective Yield?

With Nominal Rate (NR) & Number of Payments Per Year (n_PYr) we can find Effective Yield using the formula - Effective Yield = 1+(Nominal Rate/Number of Payments Per Year)^(Number of Payments Per Year)-1.

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Effective Yield Formula

Effective Yield Example

Effective Yield Solution

Effective Yield Formula Elements

Other formulas in Basics of Financial Accounting category

How to Evaluate Effective Yield?

FAQs on Effective Yield

Variable Name